The Nugan Hand Scandal: Heroin, the CIA and a gangland war in Sydney (Part One)
During the 1970s, the Australian-based Nugan Hand bank is believed to have worked closely with America’s Central Intelligence Agency, carrying out money transfers for assets which helped further their agenda in the region. As a result, Nugan Hand would help launder the money made by the CIA’s contacts in organised crime, including heroin traffickers. For a time, millions were made. When it all blew up however, there would be deadly consequences, as the implicated parties scrambled to limit their exposure.
Part One: 1967–1980
In 1967, fighting had broken out in Laos for control of the region’s poppy fields, which were responsible for a large chunk of the world’s opium production. Initially, the conflict was between the forces of Burmese warlord Khun Sa and Chinese Nationalists who had fled after the Communist victory in 1949, over a shipment destined for the Royal Laotian Army. Soon however, their prospective customer entered the battle, driving them both out and taking direct control of the opium trade for itself.
At the time, the RLA was led by Major-General Ouane Rattikone, a key asset of Central Intelligence Agency. With logistical support from Air America, a CIA front company, immense profits would be made. According to subsequent revelations, a significant amount of the money would be laundered through the Nugan Hand bank, which was incorporated in 1973 by Australian financier Francis Nugan and a former Green Beret named Michael Jon Hand. As time went on, they were joined by Earl P. Yates, previously an admiral in the US Navy, who was made President of their international operations. In their legal affairs, former CIA Director William Colby served as counsel. Assisted by these powerful figures, Nugan Hand was initially a highly profitable enterprise, dealing with legitimate investors as well as more shadowy figures seeking to launder money.
In Australia, a key figure in the bank was Bernie Houghton, an American business owner. Prior to 1967, Houghton had been based in Southeast Asia, moving down under to set up shop in Sydney’s Kings Cross, where he established several nightclubs. Naturally, this brought him into close contact with a fellow Kings Cross proprietor, Abe Saffron, long reputed to be a major conduit between Sydney’s underbelly and mainstream society. At the time, the city’s criminal scene was controlled by Frank Anderson, reputedly the man to go for access to corrupt officials.
Under Anderson sat three men, Stan “The Man” Smith, Lennie “Mr Big” McPherson, and a bookmaker named George Freeman, who were all products of the country’s notorious juvenile detention centres. Having attended institutions in Mount Penang and Tamworth, which were later revealed to been home to widespread abuse, their origins are a common theme in the background of many prominent criminals who rose to prominence around this time. As adults, they are believed to have steadily eliminated their rivals in the 1960s, consolidating control of Sydney either through violence or passing information to their contacts in law enforcement.
By the end of the decade, Anderson and his three underlings had secured the city, with Saffron allegedly serving as a key conduit to politics, particularly through the Premier of New South Wales, Robert Askin. Elected in 1965, Askin oversaw widespread changes to Sydney zoning laws that opened up vast swathes of the city for development. Among those who sought to take advantage of reforms was Frank Theeman, a strong supporter of the Askin government, who was also allegedly linked to the Saffron network.
In the 1970s, Sydney had been plunged into a battle over the future of the city, with developers and their contacts facing off against a conservationist movement that had successfully reached out to a construction union known as the Builders Laborers Federation. Together, they shut down the sites of figures such as Frank Theeman, who hired a former police officer named Fred Krahe to smooth over the process of evicting residents and removing protestors. A former police officer who left the service in 1972 after being linked to the death of police informant Shirley Brifman, Krahe had become a gun for hire, and is also believed to have been employed by the Nugan Hand bank as part of their growing money laundering operations.
Krahe’s association with Theeman would later see him accused of participation in the disappearance of Juanita Nielsen, a prominent heritage activist in the Kings Cross. In July 1975, she attended a meeting at the Carousel Club, one of many properties owned by Abe Saffron, having been lured to the establishment with the offer of advertising in her community newspaper. This would prove to be her last known location, with club manager Edward Trigg convicted in 1977 of conspiring to kidnap Nielsen. As a result, Trigg, who had been placed in an institution as a child, spent a few years in prison. Despite his sentence, the likely murder of Nielsen remains officially unsolved.
The same year that Trigg went down for the Nielsen disappearance, a similar missing persons case would take place, again linked to Nugan Hand. In the example of Don Mackay however, he was based in rural Griffith, a small farming town roughly between Melbourne and Sydney. A local business owner, Mackay was also an aspiring politician, and had made a name for himself with open attacks on criminal syndicates in Griffith.
At the heart of the matter were vast cannabis plantations controlled by the Honored Society, an Australian branch of the Italian ‘Ndrangheta organisation. Mackay’s activism included passing information to law enforcement, adding police seizure to the public attention he was bringing upon Honored Society kingpins Anthony “Tony” Sergi and Robert “Aussie Bob” Trimbole.
Also from Griffith was the Nugan family, whose patriarch, Alfredo, had come to the area in 1940. Having established various agricultural concerns, his son, Ken, would take over the Nugan family businesses when he died, while Frank went on to study law at the University of California, Berkeley. It could be during his stay in the United States where the future co-founder of the Nugan Hand bank first came into contact with the CIA. Either way, he stayed abroad for a couple years, returning to Sydney in 1968, where he oversaw the public float of the Meekatharra Minerals company. It was during this process that he is believed to have into contact with Michael Jon Hand, with the two setting up their merchant bank soon after. Expanding overseas during the later 1970s, Nugan Hand reported a total turnover of $1 billion from deposits across the globe, including Singapore and the Cayman Islands.
Despite its growing international empire, the Nugan Hand would ultimately be unraveled by events close to home. During the investigation into the Mackay case, allegations came to light that the Nugan brothers had conspired to defraud shareholders in the family business. They were joined on trial by Fred Krahe and another former police offer, Keith Kelly, who were accused of heavying dissatisfied investors. The trial would bring unwanted attention to the operations of Nugan Hand, which went into receivership in April 1980 after the demise of Frank Nugan earlier that year. Found in his car with a bullet wound to the head, his death would be ruled a suicide by the authorities. As for his co-defendants, Krahe and Kelly would be acquitted, while Ken served a period of time in jail before dying suddenly in 1986.
Part Two coming soon, for more on the CIA’s links to drug trafficking: